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Digital Turbine (APPS) Q1 Earnings Beat, Revenues Up Y/Y

Zacks Equity Research

Digital Turbine APPS reported first-quarter fiscal 2020 non-GAAP earnings of 5 cents per share, which beat the Zacks Consensus Estimate by 3 cents. The company had reported non-GAAP loss of 1 cent in the year-ago quarter.

Revenues of $30.6 million also surpassed the consensus mark of $28 million and increased 38.2% on a year-over-year basis. The growth was primarily driven by higher revenue per device (RPD) from U.S.-based carrier partners and incremental contributions from newer platform products.

Moreover, U.S. RPD increased 30% year over year, driven by continued strong demand for the Digital Turbine platform among advertisers.

Digital Turbine’s mobile device management platform, Ignite, has gained significant traction. In first-quarter fiscal 2020, Ignite was installed on roughly 30 million devices. As of Aug 5, 2019, more than 290 million devices had Ignite installed.

Digital Turbine, Inc. Price, Consensus and EPS Surprise

Digital Turbine, Inc. Price, Consensus and EPS Surprise

Digital Turbine, Inc. price-consensus-eps-surprise-chart | Digital Turbine, Inc. Quote

Expansion of International Partnership: A Key Catalyst

Digital Turbine continues integration with new demand sources from SingleTap partners like AppsFlyer, Branch and Kochava. Growth in devices based on SingleTap is expected to drive more international advertising partners to the platform.

Additionally, the company is expected to expand from 12 to 50 countries with its new partner, Samsung, by second-quarter fiscal 2020. The company’s credibility among  international advertisers and other global OEM partners will consequently be boosted.

Further, management indicated that integration with Telefonica is expected to contribute revenues in the current fiscal year.

Operating Details

Non-GAAP gross margin expanded 900 basis points (bps) on a year-over-year basis to 40.2%, partially offset by higher-percentage partner revenue share as a few revenue partners met volume thresholds over the comparative period.

On a GAAP-basis, product development expenses decreased 10.1% to $2.79 million attributed to lower development payroll and professional service-related expenses in the reported quarter.

Sales & marketing (S&M) increased 24.1% to $2.29 million as a result of increased commissions of sales personnel.

General & administrative (G&A) expenses jumped 43.8% to $3.89 million, attributed to higher employee-related and consulting expenses.

Operating expenses as percentage of revenues declined 530 bps on a year-over-year basis to 29.3%.

Operating income on a GAAP basis was $3.04 million in the reported quarter. The company had reported operating loss of $1.26 million in the year-ago quarter.

Balance Sheet & Cash Flow

Digital Turbine ended first-quarter fiscal 2020 with a cash balance of $16.2 million compared with $10.9 million in the previous quarter. As of Jun 30, 2019, the company had no debt.

Cash provided by operating activities totaled $5 million in the reported quarter compared with $2.4 million in the previous quarter.

Non-GAAP free cash flow was $4.3 million in the reported quarter compared with $1.9 million in the previously reported quarter.

Guidance

For second-quarter fiscal 2020, Digital Turbine expects revenues between $31 million and $32 million.

The Zacks Consensus Estimate for revenues is currently pegged at $30.2 million.

Non-GAAP adjusted EBITDA is expected between $3.2 million and $3.7 million.

Zacks Rank & Stocks to Consider

Currently, Digital Turbine carries a Zacks Rank #2 (Buy).

Gogo Inc GOGO, Dropbox DBX, and CACI International CACI are some other top-ranked stocks in the same industry. Gogo sports a Zacks Rank #1 (Strong Buy) while Dropbox and CACI carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gogo and Dropbox are set to report quarterly earnings on Aug 8 while CACI International is scheduled to report on Aug 14.

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